DBA Regulations: Legal Guidelines and Compliance

When you run a business, you may sometimes need to engage in civil litigation to resolve a commercial dispute. Ideally, you should avoid court litigation and seek to resolve the dispute through alternative dispute resolution (ADR) methods, such as mediation.

However, if you choose to pursue a court case, it is important to understand your options and the rules governing commercial proceedings. Commercial litigation can be both time-consuming and costly. Therefore, you should be aware of the possibility of entering into a damages-based agreement (DBA) with your legal representative. This article will outline the DBA regulations, focusing on the legal guidelines and compliance with the DBA Regulations 2013.

Damages-Based Agreement (DBA)

In a DBA, you and your solicitor agree that you will pay their legal fees only if they win your case. These legal fees cover both fees and expenses, and they may also include a success fee. These agreements are known as conditional fee agreements (CFA). This arrangement allows you to pay a percentage of the damages you recover from the other party. Initially, these agreements were not permitted and were viewed as unethical. However, in 1990, the UK government introduced them in litigation.

DBA Regulations

Starting in 2013, DBAs became legal for most civil proceedings. The DBA Regulations 2013 outline the legal rules that DBAs must follow to be enforceable. If your DBA does not comply with these rules, you will not need to pay your legal fees, even if you win your case. This protection arises from the indemnity principle. The regulations describe DBAs as private funding arrangements.

What Do You Pay in a DBA?

In a DBA, you pay specific fees for your commercial litigation. You will be responsible for:

• a contingency fee, often referred to as ‘the payment’; and 
• your legal representative’s expenses, which include the costs of obtaining an expert report, unless another party must pay.

What Should a DBA Include?

The DBA regulations detail that a DBA must (for those not about employment issues) be in writing and include details on the following:

• what claim or commercial proceedings it refers to;
• the situation when you would need to pay your legal representative’s whole or part costs; and
• why did your solicitor choose the payment level.

Although the DBA regulations do not specify further requirements for what the DBA should include, some suggest including the following six points. Therefore, you may include what your legal representative deems appropriate. These points are:

• defining success;
• providing details on how the reward is calculated;
• clarifying who pays disbursement;
• stating whether you or your solicitor will pay adverse costs;
• outlining how any settlement disputes between you and your solicitor will be resolved; and
• specifying the circumstances under which you or your legal representative can terminate the DBA.

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Key Takeaways

A damages-based agreement (DBA) or conditional fee arrangement (CFA) is a no-win, no-fee agreement, meaning you only pay your solicitor’s fees if they win your case. The Damages-Based Agreements Regulations 2013 primarily regulate DBAs. To be enforceable, DBAs must comply with these regulations. These regulations also specify what a DBA should consist of.

If you need help understanding the DBA regulations, our experienced disputes solicitors can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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